Chinese grey market a ‘$1 billion tax hole’

Baby formula is packed into boxes and shipped to China. Picture: Ellen Smith

THEY came to public attention last year at the height of the baby formula shortage that wreaked havoc in our supermarkets.

But the network of Chinese personal shoppers known as daigou have been quietly working away behind the scenes Australia’s retail economy for years.

And the Tax Office may soon have them in its sights, with reports that up to $1 billion in taxes are slipping through the net.

Of the tens of thousands of daigou, or resellers, who ship groceries and skincare products to friends and relatives in China — selling goods at a premium of up to 50 per cent and making as much as $100,000 a year — most are unlikely to declare the income, insiders say.

“A Chinese consumer pays the daigou in renminbi. The daigou buys the product using the Australian dollar and then ship it,” Benjamin Sun, director at consultancy ThinkChina, told Reuters.

Mr Sun previously told news.com.au that the daigou industry was so well established that “almost every Chinese student would know someone doing this work around them.”

Before it leaves the country, items like baby formula are packed at so-called “souvenir stores”, then shipped in lots of under 5kg and labelled as “gifts” or “personal use items” to avoid paying Chinese import tax.

Tax experts said the undeclared income could easily add up to $1 billion, and that the money would be hard to track because transactions were conducted offshore — although this did not mean it was not declarable.

The Chinese appetite for “clean and green” Australian food and health products is behind the boom in daigou operations, with the buyer agents marketing goods to customers on popular Chinese online messaging app WeChat.

Souvenir stores have become a cottage industry servicing the growing daigou market in the past few years. At one store in Sydney’s Central Park precinct, boxes ready for shipping can be seen piled high inside the windows.

Baby formula and vitamins are among the most popular items, and items are often shipped along with shopper dockets which serve as certificates of authenticity, reassuring buyers they are getting authentic products sold at retailers like Coles, Woolworths and Chemist’s Warehouse.